Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

The following discussion of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and notes thereto included in, Item 1 in this Quarterly Report on Form 10-Q. This item contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements.

Forward-Looking Statements

This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain forward-looking statements. Such forward-looking statements are based on current expectations, estimates, and projections about our industry, management beliefs, and certain assumptions made by our management. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," variations of such words, and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. However, readers should carefully review the risk factors set forth herein and in other reports and documents that we file from time to time with the Securities and Exchange Commission, particularly the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K.

Narrative Description of the Business

Focus Universal Inc. (the "Company," "we," "us," or "our") is a Nevada corporation. Prior to our acquisition of the commercial property located at 901 Corporate Center Drive, Monterey Park, California (the "Property"), we had two sources of revenue: generated from our Universal Smart Technology and our software to streamline SEC financial reporting.: Upon our acquisition of the Property in April 2026, our primary source of revenue shifted to revenue generated from rental of our Property. Accordingly, periods prior to the acquisition reflect the historical financial statements of the Company, and the results of operations of the Property are included beginning on the acquisition date. As a result, the results of operations, liquidity and capital resources information for the nine months ended September 30, 2026 is not directly comparable to the prior-year period.

During the nine months ended September 30, 2026, we generated $1,441,078 from rental income from the Property. We currently have executed leases for rental of 97,931 square feet of space through December 31, 2026 from 12 tenants and anticipate generating $1,464,523 of revenue for the period from April 17, 2026 through December 31, 2026 from the rental income derived from the Property assuming no current leases are terminated.

We have developed five proprietary technologies utilizing our patent portfolio which we believe solve the most fundamental problems plaguing the internet of things ("IoT") industry through: (1) increasing overall chip integration by shifting integration from the component level to the device level; (2) creating a faster 5G cellular technology by using ultra-narrowband technology; (3) leveraging ultra-narrowband power line communication ("PLC") technology; (4) proprietary User Interface Machine auto generation technology; and (5) incorporating all our core technologies into a single chip. Our Universal Smart Technology is designed to overcome instrumentation interoperability and interchangeability. The electronic design starts from a 90% completed common foundation we call our universal smart instrumentation platform ("USIP"), instead of the current method of building each stand-alone instrument from scratch. Our method has the potential to eliminates redundant hardware and software and results in significant cost savings and production efficiency. We also provide sensor devices and are a wholesaler of various air filters and digital, analog, and quantum light meter systems. We holds 27 patents and patents pending in various phases of the patent process.

Our Perfecular subsidiary is developing and designing a software to streamline SEC financial reporting for financial reporting and tax firms. Currently, we have completed the SEC financial reporting software in a Microsoft Word format. Our team is focused on streamlining the entire SEC financial reporting process for SEC attorneys, PCAOB accounting firms, and other financial reporting professionals. Our goal is that with a single click, our software automatically retrieves financial data from external accounting systems and generates consolidated financial statements and SEC reports in WORD, PDF, HTML, and XBRL formats-all within just a few minutes. Our developers are trying to eliminate human involvement when it comes to manually updating the numbers. This automation is designed to create an error-free, seamless process. Customer testing of the fully automated SEC financial reporting software began in July 2025.

Our common stock is listed on the Nasdaq Capital Market.

Recent Developments

Certification of Universal Smart IoT Devices and Sensors

On August 20, 2026, the Company announced that its Universal Smart device and associated industrial sensors had completed certification testing by GRG Metrology & Test Group Co., Ltd. and Centre Testing International Group Co., Ltd. The products identified in the announcement include pH, total dissolved solids (TDS), oxidation-reduction potential (ORP), dissolved oxygen, and turbidity sensors. Management believes these certifications represent a step toward broader commercialization of the Company's Universal Smart IoT platform and may facilitate marketing of the applicable products in domestic and international markets. Certification, however, does not establish customer demand or guarantee product sales, revenue, or profitability. The Company's ability to commercialize these products will depend on factors including customer adoption, pricing, production capabilities, distribution, competition, and applicable market requirements.

Strategic Partnerships, Commercial Pathways and Potential Financing Activities

During August 2026, the Board adopted a unanimous written consent addressing the Company's strategic partnership program, potential financing pathways, and use of the Company's proprietary deterministic artificial intelligence technology ("Deterministic AI") across additional commercial applications. The consent authorizes management, subject to applicable law, definitive agreements, available capital, and any required Board, stockholder, Nasdaq or regulatory approvals, to continue evaluating (i) a potential PIPE financing or strategic placement, including a transaction that may exceed the applicable 19.99% issuance threshold where permitted and approved, and (ii) multiple strategic partnership transactions structured, where practicable and legally permissible, below that threshold. No financing or securities issuance should be understood to have been completed solely as a result of the Board's authorization.

The Board-authorized commercial pathways include domestic credit-card processing (which management has described as completed), international credit-card processing, vehicle financing, vehicle-dealer financing, crypto integration with equity financing subject to applicable securities, financial-services and digital-asset requirements, IoT product sales and financing, and freight-forwarding and logistics applications using Deterministic AI. The Company expects to pursue these opportunities through a partner-led "flywheel" model that seeks to use established counterparties' customer relationships, operational infrastructure and distribution capabilities to accelerate technology adoption and expand software and related product sales. These initiatives remain subject to due diligence, definitive agreements, required approvals, execution and market acceptance; there can be no assurance that any proposed partnership or financing will be consummated or generate material revenue.

Management is also authorized under the Board consent, subject to applicable restrictions and approvals, to evaluate and make investments, expenditures, advances, deposits, capital contributions, loans, securities acquisitions, licensing arrangements, revenue-sharing arrangements and other commercially reasonable commitments in connection with these pathways. Such activities may require capital and may expose the Company to investment, counterparty, liquidity, regulatory, valuation and execution risks. The Company's objective is to use its Deterministic AI platform as a common technology layer across partner channels, with the potential both to expand sales and licensing of the Company's software and IoT products and to realize gains from investments or securities transactions. Any capital gains are uncertain, depend on the performance and disposition of investments, and should not be viewed as recurring operating revenue.

The Board consent also approved and recommended, subject to stockholder approval and applicable Nasdaq Listing Rules, an amendment to increase the aggregate shares reserved under the Company's 2018 Stock Incentive Plan to 10,000,000 shares and to preserve the intended size of that pool notwithstanding a reverse stock split, to the maximum extent permitted by law and the governing plan. The consent further recommended a bylaw amendment to establish a stockholder-meeting quorum of 33 1/3% of outstanding shares entitled to vote, present in person, by remote communication or represented by proxy. These matters are not effective merely by virtue of the Board's recommendation and remain subject to the required stockholder vote and other applicable requirements. The Board also authorized calling a special meeting of stockholders.

Deterministic AI and Enterprise Workflow Automation

Through its Perfecular subsidiaries, the Company is developing and seeking to commercialize software designed to automate complex business processes using what the Company refers to as "Deterministic AI." The Company's approach is focused on workflows in which information must be processed according to defined business rules, accounting requirements, regulatory standards or other predetermined constraints. The objective is to automate the execution, validation and completion of these workflows with greater consistency, repeatability and efficiency than traditional manual processes.

The Company views Deterministic AI as complementary to generative artificial intelligence. Generative AI is commonly used to interpret information, create content and support tasks with multiple possible answers. The Company's Deterministic AI technology is designed to address process-oriented tasks in which information must be reconciled, validated, formatted or processed according to defined requirements. The Company believes that combining these approaches may provide opportunities to automate portions of complex enterprise workflows that have historically required substantial manual intervention.

The Company's initial applications focus on SEC financial reporting automation. The platform is designed to support financial reporting professionals by automating portions of the preparation and formatting of SEC filings, including EDGARization and XBRL tagging. As described in the Company's public announcements, the technology is designed to identify financial reporting concepts within disclosures, select corresponding XBRL taxonomy elements, format documents for EDGAR submission and generate structured outputs. The Company is also developing financial auditing automation capabilities intended to support the review and validation of financial information.

In July 2026, the Company announced its Deterministic AI Forms Auto-Populate Engine, designed to process business documents from multiple sources, identify and extract relevant information, validate and correlate information across documents, and populate downstream business forms. Potential document inputs identified by the Company include purchase orders, invoices, contracts, bills of lading, shipping documents and customs documentation. Potential outputs include commercial invoices, packing lists, customs declarations, shipping instructions and other business documents. The commercial scope, supported document types and performance of these capabilities remain subject to the applicable product configuration, testing and customer requirements.

The Company believes the underlying technology may have applications beyond SEC financial reporting, including accounting, tax preparation, medical billing, freight forwarding, insurance and other business processes that rely on structured information and defined rules. These applications represent potential areas of expansion and should not be interpreted as indicating that the Company has completed commercial deployment, secured customers or generated material revenue in each of these markets.

The Company's strategy is to develop its initial financial reporting applications while evaluating opportunities to apply its technology to additional enterprise workflows. The timing and extent of commercialization will depend on product readiness, testing, customer acceptance, pricing, distribution, integration requirements, competition, available resources and the Company's ability to establish commercially viable sales and service arrangements.

Deterministic AI Platform - Development and Commercialization Strategy

During 2026, the Company publicly described additional capabilities of its proprietary Deterministic AI technology and its intended application to enterprise workflow automation. The Company's announced development areas include SEC financial reporting automation, financial auditing automation and the Deterministic AI Forms Auto-Populate Engine.

SEC financial reporting automation. The Company's software is designed to automate portions of the preparation of SEC filings, including document formatting, EDGARization and XBRL tagging. The Company believes that reducing manual document preparation, taxonomy selection and formatting work may improve workflow efficiency and reduce the time required to prepare filings. The extent of any improvement will depend on the complexity of the filing, the quality and completeness of the source information, the applicable reporting requirements and the need for review by management and professional advisers.

Financial auditing automation. The Company has identified financial auditing automation as another application of its Deterministic AI technology. This application is intended to support the identification and validation of financial information and inconsistencies. The Company should describe specific functions as commercially available only to the extent that those functions have been developed, tested and made available for customer use.

Forms Auto-Populate Engine. In July 2026, the Company announced a document-processing engine designed to extract and correlate information from multiple business documents and populate downstream forms. The Company believes this technology may be applicable to workflows in accounting, logistics, freight forwarding, customs documentation and other areas where information is transferred among related documents. The extent of the potential commercial opportunity will depend on the system's performance in actual customer environments, the complexity of customer workflows, integration requirements and customer willingness to pay.

Potential market expansion. The Company believes its technology may be applicable to additional industries that depend on rule-driven document processing, including tax preparation, medical billing and insurance. The Company is evaluating the potential to extend the technology to additional applications. Such expansion may require further development, testing, customer-specific configuration, integration work, sales and marketing expenditures, and the establishment of appropriate commercial relationships.

Commercialization and operating results. The Company's ability to realize revenue from Deterministic AI will depend on its ability to convert development activities and product demonstrations into paying customers, execute customer agreements, deliver products that meet customer requirements, establish pricing and distribution arrangements, and provide ongoing support. Development announcements and descriptions of potential product capabilities do not, by themselves, establish customer adoption, recurring revenue or commercial profitability.

Commercialization remains at a development, testing and early customer-engagement stage.

The Company expects that further development and commercialization may require additional financial and personnel resources. There can be no assurance that the Company will successfully commercialize the technology, obtain a sufficient number of customers, achieve anticipated productivity improvements, or generate revenue sufficient to recover its development and commercialization costs.

Product Pipeline and Deterministic AI Development

The Company is pursuing the development and commercialization of a portfolio of software and technology products based on its proprietary technologies, including its Deterministic AI platform and Universal Smart Internet of Things ("IoT") platform. The Company's product development strategy is focused on automating structured business processes, reducing manual data entry and document preparation, improving the consistency of information processing, and expanding the commercial applications of its existing technology platforms.

The Company's current product pipeline includes the following principal areas:

1. Deterministic AI - SEC Financial Reporting Automation

Through its Perfecular subsidiary, the Company is developing software designed to automate portions of the preparation of public-company financial reports and SEC filings. The intended functionality includes the processing of financial information, preparation and formatting of financial statements and related filing documents, EDGARization and XBRL tagging.

The Company has previously completed a Microsoft Word-based version of its SEC financial reporting software, and customer testing of the automated financial reporting software began in July 2025. The Company is continuing to develop and refine the platform with the objective of automating additional portions of the financial reporting workflow and supporting the generation of filing documents in formats including Word, PDF, HTML and XBRL.

The Company believes that the platform may reduce the time and manual effort required to prepare financial reports. Actual results will depend on the completeness and accuracy of source information, the complexity of the applicable filing, software functionality, and review by management and other responsible professionals. The software is intended to support the financial reporting process and does not eliminate the responsibility of public companies, their management, auditors or legal advisers to review and approve required disclosures.

2. Deterministic AI - Financial Auditing Automation

The Company has identified financial auditing automation as an additional application of its Deterministic AI technology. The planned application is intended to assist with the organization, comparison and validation of financial information and the identification of inconsistencies among financial records and supporting documents.

The Company is evaluating the development and integration of these capabilities with its financial reporting software. The extent to which these functions can be incorporated into a commercial product will depend on further development, testing, validation and customer requirements. The Company has not assumed that planned auditing functionality will be commercially available until the applicable capabilities have been sufficiently developed and tested.

3. Deterministic AI - Forms Auto-Populate Engine

In July 2026, the Company announced a document-processing engine designed to extract and correlate information from multiple business documents and use the extracted information to populate related forms and documents. The Company is evaluating applications of this technology in workflows that involve the transfer of information among related documents, including accounting, logistics, freight forwarding and customs documentation.

The Company believes that this technology may provide a basis for additional industry-specific software applications. Commercial deployment may require further development, testing, integration with customer systems and configuration to accommodate individual customer workflows. The Company's ability to commercialize these applications will depend on product performance, customer demand, pricing and the development of appropriate sales and distribution channels.

4. Deterministic AI - Additional Industry Applications

The Company is evaluating additional potential applications of its Deterministic AI technology in business processes involving structured information, document processing and rule-based workflows. Potential areas of application include tax preparation, medical billing, insurance documentation and other administrative and financial processes.

These areas represent potential extensions of the Company's technology and are not necessarily separate completed or commercially available products. Any expansion into these markets may require additional product development, testing, regulatory or industry-specific review, customer integration and commercial investment. There can be no assurance that the Company will successfully develop or commercialize products for these additional applications.

5. Universal Smart IoT Devices and Sensors

In addition to its software pipeline, the Company continues to pursue the development and commercialization of its Universal Smart IoT platform. The platform is designed around a common hardware and software foundation intended to support multiple interchangeable sensor devices, with the objective of reducing the need to develop separate hardware and software for each individual instrument.

On August 20, 2026, the Company announced that its Universal Smart device and associated industrial sensors had completed certification testing by GRG Metrology & Test Group Co., Ltd. and Centre Testing International Group Co., Ltd. The products identified in the announcement included pH, total dissolved solids (TDS), oxidation-reduction potential (ORP), dissolved oxygen and turbidity sensors.

The Company believes that the completion of certification testing represents progress toward commercialization of the applicable products. The Company has also reported commencement of mold tooling design for its Universal Smart IoT platform. Further commercialization will require the Company to complete applicable manufacturing, production, quality-control, distribution and customer-development activities. Certification and tooling activities do not, by themselves, establish commercial demand or guarantee product sales or profitability.

Development Priorities and Commercialization Risks

The Company's development priorities include completing and refining its Deterministic AI software applications, evaluating additional commercial applications, advancing the Universal Smart IoT platform toward production, and identifying potential customers and strategic commercial relationships.

The Company's ability to generate revenue from these products will depend on its ability to complete development and testing, demonstrate reliable product performance, obtain customer acceptance, establish commercially viable pricing, execute customer agreements and provide ongoing implementation and support. Certain products and applications described above remain under development or evaluation and may require additional capital, personnel and other resources before they can be commercially deployed.

The Company will continue to evaluate the allocation of development resources based on technical progress, customer feedback, commercial opportunities and available financial resources. There can be no assurance that any product under development will be completed on the anticipated schedule, achieve commercial acceptance, generate material revenue or become profitable.

Acquisition and Operations of 901 Corporate Center Drive

On April 17, 2026, the Company, through its wholly owned subsidiary, Lusher Holding LLC, completed the acquisition of the commercial property located at 901 Corporate Center Drive, Monterey Park, California, for an aggregate purchase price of $17.7 million, exclusive of closing costs. The Property consists of four parcels totaling approximately 10.73 acres, approximately 100,743 square feet of rentable Class A office space, and a four-level parking structure. The parking facilities include a solar-panel canopy subject to a lease arrangement.

At the time of acquisition, the Property was approximately 99.2% occupied by approximately 16 tenants. The existing tenant leases were retained in connection with the acquisition, and most leases then in place had remaining terms of approximately five to eight years. The Company has retained third-party property management services and intends to operate the Property as an income-producing commercial real estate asset while using approximately 2,000 square feet for its own operations.

The acquisition expanded the Company's operations beyond its historical technology development, manufacturing and related business activities by adding commercial rental income and the associated costs and responsibilities of owning and operating a commercial property. The financial results from the Property depend on continued tenant occupancy, collection of contractual rent, lease renewals, property operating costs, required maintenance and capital expenditures, and the Company's ability to service the debt incurred to finance the acquisition.

Rental Revenue and Property Operating Results

For the three months ended September 30, 2026, the Property generated rental revenue of approximately $789,128. For the nine months ended September 30, 2026, rental revenue was approximately $1,441,078. No rental revenue generated in 2025 as the Company acquired the Property on April 17, 2026; accordingly, the 2026 results include only the period during which the Company owned or operated the Property, as applicable. Comparisons with 2025 should take into account that the Company did not own the Property during the corresponding prior-year periods.

Property-related operating expenses for the three and nine months ended September 30, 2026 were approximately $400,655 and $660,318, respectively. These expenses included property management, repairs and maintenance, utilities, insurance, and property. The Company should separately discuss any material changes in rental revenue, property operating expenses, depreciation or interest expense that affected its consolidated results.

The Property provides a source of recurring contractual rental income; however, rental revenue and operating results may fluctuate as leases expire, tenants renew or vacate, new leases are executed, rental rates change, or operating expenses increase.

Tenant Concentration and Lease Expirations

The Company's rental revenue and tenant receivables are subject to concentration and credit risk. A default, bankruptcy, early termination or nonrenewal by a significant tenant could reduce rental revenue, increase vacancy and leasing costs, and adversely affect the Property's operating results and cash flows.

As of September 30, 2026, certain tenants occupied space on a month-to-month basis, while certain fixed-term leases were scheduled to expire in 2027 and 2028. Lease expirations and nonrenewals could result in vacancy and reduced rental income. Actual rental income may differ from contractual amounts as a result of lease renewals, vacancies, rent concessions, tenant defaults or new leasing activity.

Property Financing and Liquidity Considerations

The Company financed a portion of the acquisition with an $11.05 million term loan from East West Bank. The loan bears interest at 6.25% for the first three years and thereafter at the Wall Street Journal Prime Rate plus 0.25%, subject to a 6.25% floor, and is scheduled to mature on April 1, 2036. As of September 30, 2026, the outstanding principal balance was approximately $10,968,444. Interest expense attributable to the loan for the three and nine months ended September 30, 2026 was approximately $232,960 and $319,063, respectively.

The loan creates ongoing principal and interest payment obligations and exposes the Company to changes in interest rates after the initial fixed-rate period, subject to the contractual minimum rate. The Company's ability to meet these obligations depends in part on rental collections, property operating costs, cash available from its other operations and access to financing. The loan agreement requires a minimum debt coverage ratio of 1.50 to 1.00, tested annually beginning December 31, 2026. Failure to meet the specified quarterly coverage condition triggers restrictions on distributions and requires certain excess cash flows to be applied to loan principal until the ratio is met for two consecutive quarters. The agreement also requires a $210,000 reserve account and restricts additional indebtedness, liens and certain asset transfers without the lender's prior written consent.

Property-Related Risks and Outlook

The Property's operating performance is subject to risks common to commercial real estate, including tenant concentration, lease renewal and vacancy risk, tenant creditworthiness, changes in local commercial real estate conditions, increases in property taxes, insurance and maintenance costs, and unanticipated capital expenditures. The Property also requires ongoing management and maintenance and may require additional capital investment to preserve its condition and competitiveness.

The Company believes the Property provides an opportunity to generate recurring rental income while housing a portion of its own operations. Nevertheless, the acquisition and the Property's existing occupancy do not guarantee future rental revenue, operating profitability or positive cash flow. The Company's future results will depend on tenant retention, lease renewals, collections, operating expenses, financing costs and other factors affecting commercial real estate operations.

Reverse Stock Split

On June 23, 2026, we effected a four-to-one reverse stock split of our common stock. Except as otherwise stated, all numbers in this Quarterly Report on Form 10-Q reflect the reverse stock split.

Our Current Products Include:

We are a wholesaler of various digital, analog, and quantum light meters and filtration products, including fan speed adjusters, carbon filters and HEPA filtration systems.

Ubiquitor Wireless Universal Sensor Device

We have developed a device we call the Ubiquitor (the "Ubiquitor"), which replaces the functions of traditional digital measurement and sensing products by integrating many digital sensors and measurement tools into one single digital device. We believe the platform represents a technological advancement in the IoT marketplace by integrating large numbers of technologies, including cloud technology, wired and wireless communication technology, software programming, instrumentation technology, artificial intelligence, PLC technology, and sensor networking into a single platform. We believe the result of such integration is a smaller, cheaper, and faster circuit system design than those currently offered in the instrumentation market.

Our USIP technology that will make Ubiquitor possible is an advanced software and hardware integrated instrumentation platform that uses a large-scale modular design approach. The large-scale modular design approach subdivides instruments into a foundation component (a USIP) and architecture-specific components (sensor nodes), which together are intended to replace the functions of traditional instruments at a fraction of their cost. The USIP has an open architecture, incorporating a variety of individual instrument functions, sensors, and probes from different industries and vendors. The platform features the ability to connect potentially thousands of different sensors or probes, addressing major limitations present in traditional instrumentation systems.

Additional Focus Universal Inc. IoT Products under Smart AVX. We also sell integrated IoT equipment under the Smart AVX brand to connect devices across platform systems and to facilitate unified collaboration across audio-visual technologies, digital media technologies, security and surveillance technologies and communication technologies. This approach allows us to provide customers with ease of use, design and integration, and installation and maintenance by utilizing technology that integrates our five core technologies.

We have integrated our Smart AVX-branded products across the following strategic sub-sectors: LED Audio-visual Panel Products, large format Smart Multimedia Touch Screens, Pan Tilt Zoom ("PTZ") Dome Cameras and Network Video Recorders ("NVRs"), and VOIP Phone Services.

	1.	LED Audio-visual Panel Products. LED panel digital displays have become an integral and modern-day solution that addresses the communication and display demands of the residential and commercial customer base. Due to the flexible configuration of the LED panels, the modular design that enables the ability to incorporate a design into any size space, the flexibility of the standard size panels to accommodate curvature in the design space, the ability to address transparency in the panel displays and the ability to create new areas for delivering media to the public, our LED panel digital displays allow us to easily adapt our display design to spaces of any size and shape, making any customer space a customizable output and connected piece within a system. The option to create full-sized screens in any space, while addressing any environmental demands, allows us to use state-of-the-art media resulting in immersive, three-dimensional, captivating content delivery within any system.
	2.	Large Format Smart Multimedia Touch Screens. Smart AVX-branded large format touch screens deliver interactive solutions for a wide variety of industries and applications, including education, healthcare, commercial, residential and government applications. While interacting with a touch display is commonplace in public-consumer spaces, we integrate large format Smart touch screens in small business, commercial applications such as dental offices and other business scenarios. These market applications continue to be underserved with touch-enabled devices, and our installation engineers and design staff can customize solutions for unique business and commercial application projects. The Company, through the Smart AVX brand, offers a myriad of customized choices and a long list of options within the current touch screen technology in a refined product. Our products allow future integration of our core platform technologies, such as the LED digital displays, the Ubiquitor, PTZ Dome Cameras and VOIP Phone Systems, allowing for pinch, zoom, scrolling, and videoconferencing within the touch screen format.

Perfecular Corporate Services, One Touch Financial Software

Financial reporting is the annual and quarterly reporting process by which a public company keeps investors aware of a company's financial condition, allowing them to have the information they need before making an investment decision.

Because of the depth and nature of the information they contain, reports on Forms 10-K and 10-Q can become time-consuming, especially given the complex processes that require a company's internal teams to gather large amounts of data across multiple sources. The time and expertise required to complete the process is a substantial burden. SEC reporting deadlines are firm and inflexible.

Delays and mistakes in SEC financial reporting can have far-reaching consequences for companies and their shareholders including. SEC review, enforcement actions, and penalties. Late, inaccurate, or incomplete filings can often lead to a drop in the company's stock price and a decrease in investor confidence.

Human data entry of hundreds or thousands of financial numbers in the financial report imposes another challenge and presented by regularly occurring human error. This risk is compounded by a frequent requirement to update or revise these hundreds or thousands of numbers during the time-constrained review processes and auditing processes prior to submission.

Given the complexity and volume of data involved, companies are looking for solutions that not only save cost, and reduce the time and effort required to report in a timely manner but also improve accuracy and compliance.

We began customer testing of our fully automated SEC financial reporting software on July 22, 2025. The Company plans to launch a technology roadshow to showcase this groundbreaking platform. Interested clients, partners, corporate filers, and investors will be welcomed to contact us for meetings and product demonstrations.

Currently, several companies offer semi-automated solutions that address only part of the tagging process. We have developed a fully automated, end-to-end solution powered by both automation and Variegated AI. We believe technology enables the computer to conduct the activities for which the computer is designed and optimal, while allowing humans to remain in the decision loop and center upon what they excel at.

With a single click, our software can:

	·	Retrieve financial statements from accounting platforms,
	·	reformat data into spreadsheets for consolidated financial reporting,
	·	automatically generate consolidated financials,
	·	populate the word-processed version of SEC filings,
	·	convert the documents to SEC-compliant versions via formatting, and
	·	embed accurate tags into the HTML file - with very limited manual input.

Research and Development Efforts of Power Line Communication

Power Line Communication ("PLC") technology is a communication technology that enables sending data over existing power cables. One advantage of this technology is that PLC does not require substantial new investment for its communications infrastructure. Rather, PLC utilizes existing power lines, thereby utilizing a distribution network that already penetrates all residential, commercial and industrial premises. Accordingly, connectivity via PLC technology is potentially the most cost-effective, scalable interconnectivity approach for IoT. We believe PLC technology can be an integral part of our communication infrastructure for the IoT, which enables reliable, real-time measurements, monitoring, and control. A large variety of appliances may be interconnected by transmitting data through the same wires that provide electrical energy.

Our patented PLC technology uses an ultra-narrowband spectrum channel of less than 1 KHz to establish a long-distance link between transmitter and receiver. Thus, we believe that our proprietary ultra-narrowband PLC technology will offer a promising alternative to wireless networks and provide the backbone communication infrastructure for IoT devices.

The primary design goal of the power line network is electric power distribution, not data transmission. The harsh electrical noise present on power lines and variations in equipment and standards make data transmission over the power grid difficult. These technological challenges have impeded, or even halted, progression of PLC technology.

For a description of our products and services offering, please refer to Item 1. "Business" beginning on page 1 of our Annual Report on Form 10-K for the fiscal year ending December 31, 2025, filed with the Securities and Exchange Commission on March 31, 2026.

Research and Development Efforts of 5G Cellular Technology

Just like our ultra-narrowband technology can be used to effectively reduce noise in powerline communication technology, our internal research suggests that our ultra-narrowband technology can be leveraged to create a type of 5G wireless communication technology that can achieve both low band 5G coverage and an estimated 1 Gbps high band speed. We employ an ultra-narrow spectrum channel (<1KHz) to establish an ultra-long-distance link between the 5G base station and the receiver which reduces noise and interference entering the bandwidth.

For a description of the ultra-narrowband technology and the 5G applications, see "Part I - Item 1. Business in our Annual Report on Form 10-K filed with the SEC on March 31, 2026.

We signed a contract with Shenzhen Donghui Precision Mold Manufacturing Co., Ltd. and officially commenced the mold tooling design for the Universal Smart Internet of Things (IoT). For our Company this marks a pivotal milestone in the commercialization of the Universal Smart IoT, a breakthrough that has been over a decade in the making. With over a decade of innovation, we are now ready to move forward with full-scale production and commercialization. In doing so, we hope not only fulfill our promise to shareholders but also demonstrate to the world that deploying complex IoT technology can be as easy as plugging in an office phone. Our internal research suggests that our platform provides both a competitive edge and cost savings when compared to traditional, non-IoT devices-thanks to universal hardware and software shared across all sensors. Switching from one sensor to another requires no change to the underlying device's hardware or software, enabling true interoperability across devices.

Intellectual Property Protection

Currently, the Company has 18 pending U.S. nonprovisional patent applications and 9 issued U.S. patents.

Competitors

We have identified several competitors specifically in the wireless sensor node industry, including traditional instruments or device manufacturers. However, we are not trying to compete with traditional instruments or device manufacturers because we utilize our Ubiquitor device in conjunction with our smartphone application, which we believe will be a completely different product category.

There are many competitors in the SEC Financial Reporting software space, including Workiva, ActiveDisclosure, Datarails, and Carta. We believe that our product will be superior because our pricing will be substantially cheaper than the current competitors in the market. Also, since it is an integration for common desktop applications, we expect software implementation to be rapid, accessible, and straightforward.

IoT Installation Industry

There are several companies that compete with AVX in smart home installations, including Vivint Smart Home, Savant, Crestron and Control4. However, we believe we can distinguish ourselves from our competitors by offering substantially more customization and interoperability with existing platforms. While our service offerings do not rely on always providing the entire installation for the end client, our Company is able to seamlessly provide accenting, replacement, or conversion home automation systems which are easier to use and interoperate for the end client, and with limited rewiring. Complete installation by Crestron ranges between $100,000 and $500,000 and an installation by Control4 ranges between $70,000 and $250,000. The cheapest competitor we can identify in this sector is Vivint Smart Home, which costs less than $50,000 to install; however, we understand that the Vivint Smart Home focuses on security systems only and that users have no other smart applications, which our smart home product line would include. Our sales staff have encountered a growing client base of unhappy customers with the pre-existing and completely siloed platform systems that reportedly are not easy to use or program, require costly specialty service for simple operations, are subject to lengthy software and hardware backlogs, and despite being based on the same platform, fail to operate compatibly, possessing frequent errors and bugs. Our products are being designed to solve the foregoing problems.

Air Filtration Systems and Meter Products Industry

The air filtration system and meter products industry is a niche industry. Air purification methods are an effective way to control contaminants and improve indoor air quality; and as a result, many national and local governments overseeing indoor air quality and other emissions are enacting stricter workforce health and safety regulations in this area, which drives demand.

Market Potential

We believe universal wireless smart technology will play a critical role for traditional instrument manufacturers, as currently the undertaking of an IoT project is simply too expensive and difficult to develop for medium or smaller companies and carries a 75% failure rate according to Cisco Systems. The cost factor is the first consideration when deciding whether a company wants to develop smart wireless technologies and implement them into their products or use them in their field testing. We also hope to play a role in academic laboratories, particularly with smaller academic laboratories that are sensitive to price. Regarding the larger IoT industry statistics, overall enterprise IoT spending increased to $201 billion in 2022, an increase of 21.5%. The outlook for growth in 2023 is 18.5% from this large base of enterprise spending. More specifically, the IoT sensors market is projected to reach $26 billion by 2026 from $11.1 billion in 2022. The IoT marketplace size assessments usually include the hardware components and the software components, which often contain a Software as a Service (SaaS) model. Additionally, the rising need for reliable high bandwidth communication for IoT devices is expected to rise to $664.75 billion in 2028, spearheaded by the currently predominant services in the 5G category. We would also expect this market to grow with the addition of new categories of services delivering reliable high bandwidth communication for IoT devices and would cannibalize and expand the existing services where the new services proved to be more effective and efficient.

The financial reporting software market size was estimated at 13.9 billion in 2022 and is projected to reach $36.6 billion by 2030. The expanding demand of software solutions to reduce the overall cost of compliance and boost efficiency is one of the main reasons the financial reporting software sector is projected to grow.

Results of Operations

Our results of operations for the three and nine months ended September 30, 2026, include the revenue generated from the Property and related expenses from April 17, 2026, through September 30, 2026 which is not included in our results of operations for the three and nine months ended September 30, 2025. Accordingly, the results of operations for the three and nine months ending September 30, 2026 is not directly comparable to the prior-year periods.

For the three months ended September 30, 2026 compared to the three months ended September 30, 2025

Revenue

		For the three months ended September 30, 2026				For the three months ended September 30, 2025				Increase (Decrease) $
Rental revenue		$	789,128			$	-			$	789,128
Other revenue			13,300				28,689				(15,389	)
Total revenue		$	802,428			$	28,689			$	773,739

Our consolidated gross revenue for the three months ended September 30, 2026 and 2025 was $802,428 and $28,689, respectively. The increase in revenue was primarily attributable to an increase in rental revenue from Lusher Holding LLC.

The major components of our cost and operating expenses for the three months ended September 30, 2026 and 2025 are outlined in the table below:

		For the three months ended September 30, 2026				For the three months ended September 30, 2025				Increase (Decrease) $
Property operating expense		$	400,655			$	-			$	400,655
Cost of other revenue			57,869				30,301				27,568
Depreciation and amortization			235,838				6,272				229,566
Selling expense			2,199				2,374				(175	)
Compensation - officers and directors			117,642				124,981				(7,339	)
Research and development			484,185				288,078				196,107
Professional fees			303,761				321,917				(18,156	)
General and administrative			356,163				435,142				(78,979	)
Total operating expenses		$	1,958,312			$	1,209,065			$	749,247

For comparability, $6,272 of depreciation expense included in general and administrative expenses in the 2025 financial statements has been presented separately in the table above. This presentation adjustment does not affect total expenses or net loss.

Property operating expense for the three months ended September 30, 2026 were $400,655, compared to $0 for the three months ended September 30, 2025. The increase in property operating expenses was primarily due to the acquisition of the commercial property on April 17, 2026.

Cost of other revenue for the three months ended September 30, 2026 were $57,869, compared to $30,301 for the three months ended September 30, 2025. The increase in the cost of other revenue was primarily due to an increase in the number and quantity of other revenue-generating transactions.

Depreciation and amortization for the three months ended September 30, 2026 were $235,838, compared to $6,272 for the three months ended September 30, 2025. The increase in depreciation and amortization expense was primarily due to depreciation expense recognized on the commercial property acquired on April 17, 2026.

Selling expenses for the three months ended September 30, 2026 were $2,199, compared to $2,374 for the three months ended September 30, 2025. Selling expenses were mainly from third party advertising fees and marketing related fees. The decrease was primarily attributable to lower advertising and marketing expenses.

Compensation - officers and directors were $117,642 and $124,981 for the three months ended September 30, 2026 and 2025, respectively. The decrease in cost was a result of the decrease in the share price, which reduced the stock-based compensation expense for the associated directors.

Research and development costs were $484,185 and $288,078 for the three months ended September 30, 2026 and 2025, respectively. The reason for the change is due to small fluctuations in the staffing and other routine development expenses related to R&D, especially with respect to the spend in the Focus Shenzhen Office.

Professional fees were $303,761 during the three months ended September 30, 2026, compared to $321,917 during the three months ended September 30, 2025. The reason for the change is mainly due to the decrease in advisory fee related to equity issuance.

General and administrative expenses for the three months ended September 30, 2026 was $356,163 compared to $435,142 during the three months ended September 30, 2025. The reason for the change is mainly due to the decrease in office expenditure.

Other Income (expense)

Other expense for the three months ended September 30, 2026 was $233,541, compared to other income of $14,001 for the three months ended September 30, 2025.

Net Losses

During the three months ended September 30, 2026 and 2025, we incurred net loss of $1,389,425 and $1,166,375 respectively, due to the factors discussed above.

For the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025

Revenue

		For the nine months ended September 30, 2026				For the nine months ended September 30, 2025				Increase (Decrease) $
Rental revenue		$	1,441,078			$	-			$	1,441,078
Other revenue			84,493				254,274				(169,781	)
Total revenue		$	1,525,571			$	254,274			$	1,271,297

Our consolidated gross revenue for the nine months ended September 30, 2026 and nine months ended September 30, 2025 was $1,525,571 and $254,274, respectively. The increase in revenue was primarily attributable to an increase in rental revenue from Lusher Holding LLC.

The major components of our cost and operating expenses for the nine months ended September 30, 2026 and nine months ended September 30, 2025 are outlined in the table below:

		For the nine months ended September 30, 2026				For the nine months ended September 30, 2025				Increase (Decrease) $
Property operating expense		$	660,318			$	-			$	660,318
Cost of other revenue			107,825				237,754				(129,929	)
Depreciation and amortization			443,584				17,231				426,353
Selling expense			35,738				58,774				(23,036	)
Compensation - officers and directors			352,831				375,725				(22,894	)
Research and development			1,111,147				1,127,633				(16,486	)
Professional fees			1,440,110				1,224,063				216,047
General and administrative			1,351,188				1,207,757				143,431
Total operating expenses		$	5,502,741			$	4,248,937			$	1,253,804

For comparability, $17,231 of depreciation expense included in general and administrative expenses for the nine months ended September 30, 2025 has been presented separately in the table above. This presentation adjustment does not affect total expenses or net loss.

Property operating expense for the nine months ended September 30, 2026 were $660,318, compared to $0 for the nine months ended September 30, 2025. The increase in property operating expenses was primarily due to the acquisition of the commercial property on April 17, 2026.

Cost of other revenue for the nine months ended September 30, 2026 were $107,825, compared to $237,754 for the nine months ended September 30, 2025. The decrease in the cost of other revenue was primarily due to a decrease in the number and quantity of other revenue-generating transactions.

Depreciation and amortization for the nine months ended September 30, 2026 were $443,584, compared to $17,231 for the nine months ended September 30, 2025. The increase in depreciation and amortization expense was primarily due to depreciation expense recognized on the commercial property acquired on April 17, 2026.

Selling expenses for the nine months ended September 30, 2026 were $35,738, compared to $58,774 for the nine months ended September 30, 2025. Selling expenses were mainly from third party advertising fees and marketing related fees. The reason for the decrease is mainly due to decrease in sales related to Focus Shenzhen Office.

Compensation - officers and directors were $352,831 and $375,725 for the nine months ended September 30, 2026 and nine months ended September 30, 2025, respectively. The reason for the decrease is primarily due to the departure of certain employee.

Research and development costs were $1,111,147 and $1,127,633 for the nine months ended September 30, 2026 and nine months ended September 30, 2025, respectively. The reason for the change is due to small fluctuations in the staffing and other routine development expenses related to R&D, especially with respect to the spend in the Focus Shenzhen Office.

Professional fees were $1,440,110 during the nine months ended September 30, 2026, compared to $1,224,063 during the nine months ended September 30, 2025. The increase in these professional fees compared to the prior period was primarily due to an increase in legal advisory fees related to preferred stock and other securities matters.

General and administrative expenses for the nine months ended September 30, 2026 was $1,351,188 compared to $1,207,757 during the nine months ended September 30, 2025. The increase in general and administrative expenses was primarily due to the additional administrative and overhead costs associated with the property acquired in April 2026.

Other Income (expense)

Other expense for the nine months ended September 30, 2026 was $177,291, compared to other income of $71,262 for the nine months ended September 30, 2025.

Net Losses

During the nine months ended September 30, 2026 and nine months ended September 30, 2025, we incurred net loss of $4,154,461 and $3,923,401 respectively, due to the factors discussed above.

Liquidity and Capital Resources

Working Capital

		September 30, 2026				December 31, 2025
Current Assets		$	4,857,865			$	8,647,129
Current Liabilities			(989,317	)			(366,471	)
Working Capital		$	3,868,548			$	8,280,658

Cash Flows

The table below, for the periods indicated, provides selected cash flow information:

		For the nine months ended September 30, 2026				For the nine months ended September 30, 2025
Net cash used in operating activities		$	(2,742,684	)		$	(3,709,104	)
Net cash used in investing activities			(6,632,412	)			(27,318	)
Net cash provided by financing activities			5,870,130				572,826
Effect of exchange rate			10,239				(14,838	)
Net change in cash		$	(3,494,727	)		$	(3,178,434	)

Cash Flows from Operating Activities

Our net cash outflows from operating activities of $2,742,684 for the nine months ended September 30, 2026 was primarily the result of our net loss of $4,154,461 and changes in our operating assets and liabilities offset by the add-back of non-cash expenses.

Our net cash outflows from operating activities of $3,709,104 for the nine months ended September 30, 2025 was primarily the result of our net loss of $3,923,401 and changes in our operating assets and liabilities offset by the add-back of non-cash expenses.

We expect that cash flows from operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our net revenues and operating results, utilization of new revenue streams, in line with our shifting revenue streams, collection of accounts receivable, and timing of billings and payments.

Cash Flows from Investing Activities

For the nine months ended September 30, 2026 we had cash outflow from investing activities of $6,632,412 from the proceed from sale of marketable securities of $121,823 offset by the purchase of property and equipment of $6,656,391 and capitalized software cost of $97,844. For the nine months ended September 30, 2025 we had cash outflow from investing activities of $27,318 from the purchase of property and equipment of $27,318.

Cash Flows from Financing Activities

For the nine months ended September 30, 2026, we had cash inflows of $5,870,130, consisting of $3,547,348 in proceeds from the sale of pre-funded units in a private placement offering and $3,720,676 in proceeds from stock issuance and warrant exercises, offset by $961,860 of redemption of preferred stock, $81,891 of repayment on a bank loan, and $354,143 spent on the purchase of treasury stock. For the nine months ended September 30, 2025, we had cash inflows of $572,826, consisting of $822,501 of gross proceeds from the sale of stock issued in a private placement offering and offset by $249,675 spent on the purchase of treasury stock.

Going Concern

The Company has assessed its ability to continue as a going concern for a period of one year from the date of the issuance of these condensed consolidated financial statements. The Company incurred a net loss of $4,154,461 for the nine months ended September 30, 2026. In addition, the Company had an accumulated deficit of $35,404,538 as of September 30, 2026 and negative cash flow from operating activities of $2,742,684 for the nine months ended September 30, 2026. Substantial doubt about the Company's ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the Company will be unable to meet its obligations as they become due within one year from the financial statement issuance date. The Company believes its current cash position will be able to fund its operations through the second quarter of 2027. The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern. The Company currently suffered recurring losses from operations, generated negative cash flow from operating activities, has an accumulated deficit and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. These conditions raise substantial doubt as to its ability to continue as a going concern. These condensed consolidated financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's independent registered public accounting firm, in its report on the Company's consolidated financial statements for the year ended December 31, 2025, has also expressed substantial doubt about the Company's ability to continue as a going concern.

At September 30, 2026, the Company had cash, and short-term investments, in the amount of $4,440,231. The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due. Since inception, the Company has funded its operations primarily through equity and debt financings, and it expects to continue to rely on these sources of capital in the future. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in case of equity financing, or grant unfavorable terms in future licensing agreements. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company.

Off-Balance Sheet Arrangements

As of September 30, 2026, we did not have any off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation SK.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with U.S. GAAP. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements

Our Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements. Except for ASU 2024-03, which the Company is currently evaluating as discussed in Note 3, the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.